AJC International, Inc. v. Triple-S Propiedad ( 2015 )


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  •           United States Court of Appeals
    For the First Circuit
    No. 13-2348
    AJC INTERNATIONAL, INC.; AJC LOGISTICS, LLC,
    Plaintiffs, Appellants,
    UNDERWRITERS LLOYDS OF LONDON
    Plaintiff,
    v.
    TRIPLE-S PROPIEDAD
    Defendant, Appellee,
    ECONOMY INTERNATIONAL SERVICES, INC.;
    MANUEL ESPINOSA-CASANOVA, d/b/a Economy International Services,
    Inc.; JOHN DOE; JANE DOE; INSURANCE COMPANIES X, Y, Z,
    Defendants.
    APPEAL FROM THE UNITED STATES DISTRICT COURT
    FOR THE DISTRICT OF PUERTO RICO
    [Hon. Francisco A. Besosa, U.S. District Judge]
    Before
    Thompson, Lipez, and Barron,
    Circuit Judges.
    Manolo T. Rodríguez-Bird, with whom Jiménez Graffam & Lausell
    was on brief, for appellants.
    William A. Schneider, with whom Morrison Mahoney LLP was on
    brief, for appellee.
    June 12, 2015
    -2-
    THOMPSON, Circuit Judge.       This is an insurance case
    grounded on diversity.          The parties agree that the policy in
    question provides coverage for a particular loss of perishable
    foodstuffs.       So that's the easy part.     What the parties need us to
    decide is exactly how much coverage there is -- $500,000 or
    $25,000? For the reasons below, we agree with the district court's
    answer:       $25,000.
    I.    BACKGROUND
    The underlying facts are undisputed and not particularly
    numerous.       Based in Puerto Rico, Economy International Systems,
    Inc.       ("Economy")   provides    cold-storage   for   its   clients'   food
    products until they are ready for distribution to customers.
    During the summer of 2010, Economy was keeping more than
    a million dollars worth of foodstuffs -- things like seafood, beef,
    and chicken -- on ice for appellants AJC International, Inc. and
    AJC Logistics, LLC.1       Unfortunately, the walk-in freezers in which
    AJC's products were stored malfunctioned on a few different days,
    and the problem didn't come to light until Economy noticed the
    temperature in its freezers was off.          Economy discovered a strong
    odor emanating from product boxes, a pretty clear indication that
    the food inside had gone bad.
    1
    The parties do not distinguish between these two
    corporations.   And neither do we, especially as it makes no
    difference to the outcome.  From now on, we'll just call them,
    collectively, "AJC."
    -3-
    The United States Department of Agriculture stepped in
    and ordered the destruction of the beef and chicken products.    AJC
    worked with the U.S. Food and Drug Administration to come up with
    any way to salvage the seafood, but it, too, ended up being tossed.
    Having suffered a loss in excess of one million dollars,
    AJC sought recovery under Economy's insurance policy issued by
    appellee Triple-S Propiedad, Inc. ("Triple-S").   The parties agree
    that the nature of the loss was in the manner of food spoilage, and
    that the spoilage was caused by a mechanical breakdown of Economy's
    freezers.    And they both agree that the Triple-S policy provides
    coverage for AJC's loss as "personal property of others."    Though
    they agree on this much, the parties couldn't reach an accord as to
    the amount of coverage -- AJC believes it is entitled to $500,000,
    while Triple-S says the most AJC can get out of it is $25,000.
    Invoking diversity jurisdiction, AJC filed suit against
    Triple-S in the district court and sought a ruling that it may
    recover $500,000 under the policy.2    Each side moved for summary
    judgment, asserting no trial was needed to answer this contract
    interpretation coverage question.
    The motions were referred to a magistrate judge, who
    issued a detailed report and recommendation.   The magistrate judge
    found the Policy's terms clear and unambiguous and concluded that
    2
    AJC also sued Economy in the district court, but it never
    answered the complaint and was ultimately defaulted. Economy is
    not a party to this appeal.
    -4-
    language in the Policy's coverage for losses caused by equipment
    breakdown limited AJC's recovery to $25,000.           Accordingly, the
    magistrate judge recommended that Triple-S's motion be granted and
    AJC's denied.     The district judge adopted the magistrate judge's
    findings and recommendations in full, denied AJC's motion for
    summary   judgment,   and    granted   Triple-S's.    Unsatisfied,   AJC
    appealed.
    II.   DISCUSSION
    A.   Standard of Review
    Cross-motions for summary judgment require the district
    court to "consider each motion separately, drawing all inferences
    in favor of each non-moving party in turn."       D & H Therapy Assocs.,
    LLC v. Bos. Mut. Life Ins. Co., 
    640 F.3d 27
    , 34 (1st Cir. 2013)
    (citing Merchs. Ins. Co. of N.H., Inc. v. U.S. Fid. & Guar. Co.,
    
    143 F.3d 5
    , 7 (1st Cir. 1998)).           But see P.R. Am. Ins. Co. v.
    Rivera-Vazquez, 
    603 F.3d 125
    , 133 (1st Cir. 2010) (noting that when
    "cross-motions for summary judgment are filed simultaneously, or
    nearly so, the district court ordinarily should consider the two
    motions at the same time," but if it "opts to consider them at
    different times, it must at the very least apply the same standards
    to each").
    Our review is de novo. Sch. Union No. 37 v. United Nat'l
    Ins. Co., 
    617 F.3d 554
    , 558 (1st Cir. 2010).             We follow the
    familiar summary judgment rules and affirm summary judgment "only
    -5-
    if the record discloses no genuine issue as to any material fact
    and the moving party is entitled to judgment as a matter of law."
    Tropigas de P.R., Inc. v. Certain Underwriters at Lloyd's of
    London, 
    637 F.3d 53
    , 56 (1st Cir. 2011) (citations omitted). "[W]e
    are not straitjacketed by the [district] judge's reasoning -- quite
    the contrary, we are free to uphold [the court's] order on any
    basis present in the record."     Stor/Gard, Inc. v. Strathmore Ins.
    Co., 
    717 F.3d 242
    , 247 (1st Cir. 2013).
    B.   Applicable Law and Policy Language
    The parties do not dispute that Puerto Rico law applies
    in this diversity case.      And quite rightly so.    See EnergyNorth
    Natural Gas, Inc. v. Century Indem. Co., 
    452 F.3d 44
    , 47-48 (1st
    Cir. 2006).     Before getting into the specific Policy language
    bearing on our analysis and the parties' arguments about how it
    applies to the undisputed facts, it is helpful to talk about a few
    basic principles of Puerto Rico insurance law.
    i.   General Principles of Construction
    Under Puerto Rico's Insurance Code, P.R Laws Ann., tit.
    26, § 101, et seq., "[e]very insurance contract shall be construed
    according to the entirety of its terms and conditions as set forth
    in the policy, and as amplified, extended, or modified by any
    lawful rider, endorsement, or application attached to and made a
    part of the policy."    
    Id. § 1125.
      As the Puerto Rico Supreme Court
    has explained
    -6-
    [w]ith regard to the interpretation of
    insurance contracts, . . . these "should be
    generally understood within their most common
    and usual meaning, not paying much attention
    to grammatical rigour, but to the general use
    and popular meaning of the idioms.        The
    insured who acquires a policy is entitled to
    rely on the coverage offered to him when
    reading its clauses in the light of the
    popular meaning of the words used therein."
    Pagán Caraballo v. Silva Delgado, 
    22 P.R. Offic. Trans. 96
    , 101
    (1988) (quoting Morales Garay v. Roldán Coss, 
    10 P.R. Offic. Trans. 909
    , 916 (1981)).        "[E]xclusionary clauses are not favored, [and]
    should be strictly construed and in such a way that the policy's
    purpose of protecting the insured is met."          
    Id. Any ambiguities
    in the policy language "shall be resolved
    in   favor    of   the    insured."    
    Id. This is
      because   "[t]he
    interpretation of obscure stipulations of a contract must not favor
    the party occasioning the obscurity."          Meléndez Piñero v. Levitt &
    Sons of P.R., Inc., 
    129 P.R. Dec. 521
    , 546 (1991).           Further, when
    a Puerto Rico insurance contract is ambiguous, "the insurance
    policy stipulations are construed strongly against the insurer and
    liberally in favor of the insured."          
    Id. at 547;
    see also Quiñones
    López v. Manzano Pozas, 
    141 P.R. Dec. 139
    , 155 (1996) ("[N]ice
    constructions that would allow insurers to dodge liability are not
    favored.").
    On the other hand, Puerto Rico law does "not compel
    constructions in favor of the insured when a clause favors the
    insurer, and its meaning and scope is [sic] clear and unambiguous."
    -7-
    Quiñones          López,    141   P.R.   Dec.    at   155    (citing    cases);      cf.
    Littlefield v. Acadia Ins. Co., 
    392 F.3d 1
    , 8 (1st Cir. 2004)
    (applying New Hampshire law and observing that "we may not find a
    term ambiguous merely because it eliminates coverage").                        "In such
    cases, it [i.e., the unambiguous clause] should be held as binding
    on the insured."            Quiñones 
    López, 141 P.R. Dec. at 155
    ; see also
    Nieves v. Intercontinental Life Ins. Co. of P.R., 
    964 F.2d 60
    , 63
    (1st Cir. 1992) ("If the wording of the contract is explicit and
    its language is clear, its terms and conditions are binding on the
    parties." (citing cases)).3
    ii.   Policy Language
    To set the stage for the rest of our discussion, we begin
    with a run-down of the Policy language relevant to this appeal.
    First, the very basics.         The Policy defines the words
    "you"       and    "your"    to   mean   the     "Named     Insured    shown    in   the
    3
    We note there is some authority for the proposition that
    Puerto Rico's rules of construction may be relaxed and applied more
    even-handedly in a commercial setting, where the insured can be
    expected to have knowledge of the particular subject matter of the
    policy beyond that of an ordinary individual. See Meléndez 
    Piñero, 129 P.R. Dec. at 548-49
    (recognizing that while the wording of a
    particular commercial general liability policy "may be too
    technical and sophisticated for the average person who buys a
    policy," a principal of the insured construction company "would
    construe such terms as would a specialized average businessman with
    vast experience in the construction field," and rejecting the
    notion that "a construction company thoroughly familiar with urban
    development projects would think that when it buys liability
    insurance it is actually buying property insurance, a performance
    bond or a warranty of goods and services"). The parties do not
    make any arguments along these lines, though.
    -8-
    Declarations."          Turning to those Declarations, we see the Named
    Insured is "Manuel Espinosa DBA Economy International Services."
    Thus, when reading the Policy, "you" and "your" mean Economy, and
    only Economy.4         Similarly, the terms "'we,' 'us' and 'our' refer to
    the Company providing this insurance," Triple-S.
    This case deals with a claim of loss to AJC's property
    while it was stored in Economy's freezers.              The Policy includes
    "Personal Property of Others" as a category of "Covered Property."
    More       specifically    (and   excising   language   not   germane   to   our
    analysis) Triple-S agreed to cover such property as follows:
    A. COVERAGE
    We will pay for direct physical loss of or
    damage to Covered Property . . . caused by or
    resulting from any Covered Cause of Loss.
    1. Covered Property
    Covered Property, as used in this Coverage
    Part, means the following types of property
    for which a Limit of Insurance is shown in the
    Declarations:
    . . .
    c. Personal Property of Others
    that is:
    (1) In your care, custody or
    control; . . .
    However, our payment for loss of
    or damage to personal property
    of others will only be for the
    4
    AJC concedes it is neither a named nor additional insured.
    -9-
    account of   the   owner   of    the
    property.
    Per the Declarations, the limit of coverage for "Personal Property
    of Others" is $500,000.5
    The Policy goes on, though, to exclude certain causes of
    loss from coverage. Excluded from coverage -- meaning that Triple-
    S "will not pay for loss or damage caused directly or indirectly"
    by a particular cause -- is any "loss or damage caused by or
    resulting from . . . [m]echanical breakdown."       From now on, we'll
    call this the "Mechanical Breakdown Exclusion."
    But because Economy wanted the Policy to cover losses
    caused by mechanical breakdown, it sought, and Triple-S added, an
    endorsement   which   specifically   provided     "Equipment   Breakdown
    Coverage."    The resulting Equipment Breakdown Endorsement, as
    relevant here, provides:
    5
    The Declarations also reflect a separate "Spoilage Coverage"
    with a $50,000 limit, but this coverage is limited to spoilage
    caused by a "power outage." The parties agree that this coverage
    does not apply, as the spoilage in this case was caused by
    mechanical breakdown and not a power outage. So, we don't have to
    worry about that provision here.
    -10-
    A.    The Building and Personal Property
    Coverage Form is modified as follows:
    Additional Coverages
    The following    is    added   to   4.   Additional
    Coverages:
    Equipment Breakdown
    (1) We will pay for loss caused by or
    resulting from an "accident" to "covered
    equipment."    As used in this Additional
    Coverage, an "accident" means direct physical
    loss as follows:
    (a) mechanical breakdown . . .
    (2) Unless otherwise shown in a Schedule, the
    following coverages also apply to loss caused
    by or resulting from an "accident" to "covered
    equipment".   These coverages do not provide
    additional amounts of insurance.
    . . .
    (c) Spoilage
    (i) We will pay for your loss of
    "perishable   goods"    due   to
    spoilage.
    . . .
    The most we will pay for loss or damage under
    this [Spoilage] coverage is $25,000 unless
    otherwise shown in a Schedule.
    To keeps things clear, from now on we'll call the coverage for
    spoilage of perishable goods added by this Endorsement "Spoilage
    -11-
    Coverage." We'll also refer to the $25,000 limit referenced at the
    end of the Spoilage Coverage the "Spoilage Sublimit."6
    The added Endorsement provides its own exclusions:
    B.   The Causes of Loss-- Basic Form, Broad
    Form or Special Form is modified as follows:
    Exclusions
    (1) All      exclusions    and    limitations     apply
    except:
    (a) In the Causes of Loss-- Special
    Form:
    (i) Exclusions B.2.a, B.2.d.(6)
    and B.2.e.
    One of the referenced, now-inapplicable exclusions to Equipment
    Breakdown     Coverage     is   Exclusion      B.2.d.(6)   --   the    Mechanical
    Breakdown Exclusion.
    The Endorsement sets forth other, new exclusions to its
    specific Equipment Breakdown Coverage that are not found in the
    main body of the Policy.         For example, things such as structures,
    foundations, insulating material, sprinkler piping, and sewer
    piping are not "covered equipment."             Also excluded is any "damage
    caused   by    or   resulting    from"    Economy's    "failure       to   use   all
    reasonable means to protect the 'perishable goods' from damage
    6
    The Equipment Breakdown Endorsement defines several terms
    used therein, including "accident," "covered equipment," and
    "perishable goods."      We don't need to worry about these
    definitions, though, because the parties do not dispute that
    Economy's freezers constituted "covered equipment" or that AJC
    suffered a loss of "perishable goods" as a result of an "accident."
    -12-
    following an 'accident,'" along with damage caused by or resulting
    from "any defect, virus, loss of data or other situation within
    'media.'"       Additionally, the Endorsement modifies some of the
    exclusions found in the Policy's main body by adding or subtracting
    language.
    This run-down is sufficient to get the lay of the land.
    Other relevant provisions will be identified and discussed as
    needed below.
    C.   Coverage Analysis
    i.   Framing the Issues
    Now for the parties' arguments on appeal.           In pursuit of
    its coverage claim, AJC does not take the position that the Policy
    is ambiguous. Instead, it relies on the Policy's plain language to
    say that the Equipment Breakdown Endorsement deleted the Mechanical
    Breakdown Exclusion found in the original Policy.                  It pins this
    argument      on   Section     B.1(a)(i)       of   the    Equipment     Breakdown
    Endorsement, which states that "[a]ll exclusions and limitations
    apply except" for certain specifically-enumerated ones -- including
    the Mechanical Breakdown Exclusion -- listed immediately after.
    AJC urges us to find that this contractual language deletes those
    exclusions from the original Policy.                 And with the exclusion
    deleted, AJC reasons, coverage is then found in the Policy's main
    body   (the    Personal      Property   of     Others     provisions),    not   the
    -13-
    Endorsement.7      AJC goes on to say that this means the $500,000
    coverage limit for Personal Property of Others (which is set forth
    in the Declarations) is available to satisfy its claims.8
    Not surprisingly, Triple-S disagrees with AJC, telling us
    that the "clear and unambiguous terms of the Triple-S Policy
    provide a $25,000 sub-limit for spoilage of 'perishable goods'
    caused by or resulting from equipment breakdown."           Appellee Br. at
    18.       Thanks   to   the   Policy's   exclusion   of   losses   caused   by
    mechanical breakdown (as happened here), Triple-S says, instead of
    $500,000 being available for loss to the Personal Property of
    Others, $0 is.          In other words, the main body of the Policy
    provides no coverage for AJC's loss.          But, Triple-S explains, the
    Equipment Breakdown Endorsement added coverage for losses stemming
    from equipment breakdown back to the Policy, including situations
    7
    As AJC puts it, coverage is "pursuant to Section A. of the
    Building and Personal Property Coverage Form." Appellant Br. at
    20.
    8
    AJC further posits that, "[i]f, in fact, the $500,000.00
    coverage limit in the Triple-S Policy is not available for a loss
    caused by or resulting from a mechanical breakdown of frozen food
    products owned by a client of the insured (Economy), then this
    coverage limit is illusory." Appellant Br. at 22. While the Court
    is familiar with the concept of illusory coverage, AJC does not
    explain what it means by an illusory coverage limit. And even if
    we presume that what AJC actually means to say is that the coverage
    itself is what's illusory, AJC fails to tell us how this can be so
    when both parties agree that there is coverage for AJC's loss. Any
    argument along the lines of illusory coverage or an illusory
    coverage limit (whatever that might be) has been waived for failure
    to develop it on appeal. See United States v. Zannino, 
    895 F.2d 1
    ,
    17 (1st Cir. 1990).
    -14-
    like       here    where        an   equipment     breakdown    results   in    loss    of
    perishable             goods.        Furthermore,      Triple-S    argues      that    the
    Endorsement's Spoilage Coverage comes with its own $25,000 limit,
    which caps AJC's recovery at $25,000.9
    ii.    Analysis
    Now that we've laid out the applicable law, Policy
    provisions, and the parties' arguments, we can get to the bottom of
    this dispute.
    Because       neither    party     contends   the   Policy     or    its
    Mechanical Breakdown Exclusion is ambiguous, we will not go out of
    our way to find ambiguity.                  In the absence of claimed ambiguity,
    our job under Puerto Rico law is to simply apply the provisions as
    written.          We begin, as we must, with the plain language.
    1.    Policy Language
    As noted, the parties agree on the essential facts:
    AJC's perishable goods spoiled while in Economy's care, resulting
    in financial loss to AJC.                 They agree the spoilage resulted from a
    mechanical breakdown of Economy's freezers, and that AJC's goods,
    as Personal Property of Others, fall under the Policy's definition
    of Covered Property.
    Turning to the Policy itself, we see that Triple-S agreed
    it would "pay for direct physical loss of or damage to Covered
    9
    Triple-S raises a few other arguments, but we do not need to
    reach them to decide this appeal.
    -15-
    Property . . . caused by or resulting from any Covered Cause of
    Loss."   Policy, Building and Personal Property Coverage Form, § A.
    This type of policy, "called, in insurance lingo, an 'all risks
    policy' -- covers all physical loss to the [specified] property
    unless   'caused      by   or   resulting    from'   an   excluded      peril."
    
    Stor/Gard, 717 F.3d at 244
    . The Equipment Breakdown Exclusion then
    precludes coverage for losses caused by or resulting from the peril
    of mechanical breakdown.        Policy, Causes of Loss - Special Form,
    § B.(2)(6).
    Significantly, though, the Policy is individualized so as
    to   contain   the    Equipment    Breakdown    Endorsement,        which    adds
    "Equipment Breakdown Coverage" back to the Policy.                  Under this
    coverage, Triple-S agreed to pay for certain losses "caused by or
    resulting from an 'accident' to 'covered equipment.'"                  Policy,
    Equipment Breakdown Endorsement ("Endorsement") § A.(2).                     The
    Endorsement    also    explicitly    adds     coverage    for   a    "loss     of
    'perishable goods' due to spoilage," 
    id. at §
    A.(2)(c)(i), which is
    what we've been calling Spoilage Coverage.
    In light of the agreed upon facts, it is clear from the
    Endorsement's plain language that Spoilage Coverage applies to
    AJC's loss.    There is no dispute about this.       The question is, just
    how much coverage is available?             The Spoilage Coverage itself,
    setting forth its own Sublimit, suggests an answer:             "The most we
    -16-
    will pay for loss or damage under this coverage is $25,000 unless
    otherwise shown in a Schedule."            
    Id. at §
    A.(5)(c).10
    AJC raises a couple of arguments as to why we should
    interpret    the    Policy       and   Equipment    Breakdown     Endorsement    as
    providing $500,000 of coverage for its loss.               Neither, we believe,
    has merit.
    2.    Deletion of the Mechanical Breakdown Exclusion
    We    start    with   AJC's    contention     that    the   Equipment
    Breakdown Endorsement "expressly deleted" the Mechanical Breakdown
    Exclusion altogether.            AJC relies (almost exclusively) on our
    opinion in Fidelity Co-Operative Bank v. Nova Casualty Co., 
    726 F.3d 31
    (1st Cir. 2013), to say that we have already decided
    language similar to that in the Endorsement deletes an exclusion.
    Although      AJC   makes   Fidelity    the   centerpiece     of   its
    argument, it is of no assistance.           The long and short of it is that
    the policy and endorsement at issue there involved quite different
    language than appears in the Triple-S Policy.                     In Fidelity, an
    amendatory endorsement provided simply that certain "[e]xclusions
    are 
    deleted." 726 F.3d at 37
    (emphasis added).            This clear text,
    we found, resulted in the deletion of the "entire exclusion" at
    issue there.       
    Id. at 37
    n.2.
    10
    AJC does not argue that any Schedule applies to increase the
    $25,000 Spoilage Sublimit.
    -17-
    The contractual language here is not even close to what
    we had before us in Fidelity.            Most obviously, the Equipment
    Breakdown Endorsement does not say that it deletes the Mechanical
    Breakdown Exclusion.     It provides instead that "[a]ll exclusions
    and limitations apply except" for those specifically designated,
    including the Mechanical Breakdown Exclusion.          And, per the plain
    language, the exceptions referred to are inapplicable only insofar
    as   the    reestablished   additional     coverage    provided     by   the
    Endorsement is concerned.11    Far from deleting that Exclusion from
    the original Policy, the Equipment Breakdown Endorsement simply
    renders it inapplicable to certain coverage situations, like when
    perishable goods spoil as a result of "an 'accident' to 'covered
    equipment.'"     See   Endorsement   §    A.(2).      In   sum,   Fidelity's
    dissimilar contract language does not support AJC's proposition
    that the Equipment Breakdown Endorsement's language in Economy's
    policy deleted the Mechanical Breakdown Exclusion.
    Having disposed of its Fidelity-based argument, AJC is
    left with the bald assertion that the Endorsement "expressly
    deleted the [M]echanical [B]reakdown [E]xclusion."           Appellant Br.
    at 18.     Beyond citing to Fidelity, AJC does not explain how the
    Endorsement does so. Since nowhere does the Endorsement state that
    11
    Further, use of the word "apply" presupposes the continuing
    existence of the Mechanical Breakdown Exclusion. After all, it
    would be nonsensical to say that something which no longer exists
    in the world (having been deleted) does or does not apply in a
    particular situation.
    -18-
    it deletes the Exclusion, this omission is practically enough on
    its own to doom AJC's position.           And what's more, we find that
    AJC's take doesn't jibe with the Policy's overall structure or
    plain language.
    First,   by   setting    forth    new    "Additional      Coverages"
    previously unknown to the Policy (including Spoilage Coverage), the
    Endorsement acts as a sort of "mini-policy."              Like the Policy
    itself, the Endorsement sets forth an insuring agreement complete
    with its own definitions, detailed conditions, and deductible. The
    Endorsement even has something to say about exclusions. As we have
    seen, it specifies that certain existing exclusions do not apply to
    the Endorsement's coverage, it modifies other exclusions, and it
    adds still others that are only applicable to the Endorsement's
    brand of Equipment Breakdown Coverage.12          Against this backdrop, it
    is clear that the Equipment Breakdown Endorsement is meant to do
    much more than simply delete an exclusion.
    Furthermore,    and     perhaps   most     telling   of    all,   the
    Endorsement does explicitly delete a portion of one of the original
    12
    For example, the Endorsement excludes things like
    foundations, cabinets, insulating material, sewer pipes, water
    pipes, excavation or construction equipment, and equipment mounted
    on a vehicle from its definition of "covered equipment."
    Endorsement § B.(3)(a).     And among other causes of loss, it
    excludes coverage for loss or damage caused by or resulting from "a
    hydrostatic, pneumatic or gas pressure test of any boiler or
    pressure vessel," along with loss caused by or resulting from "an
    insulation breakdown test of any type of electrical equipment."
    
    Id. at §
    B.(3)(b)(iii).
    -19-
    exclusions in certain situations.         And -- unlike the policy we
    construed in Fidelity -- the Endorsement explicitly limits the
    effect of that deletion to coverage under the Endorsement itself.
    Specifically, the Endorsement states that
    [i]f the Causes of Loss-- Special Form
    applies, as respects this endorsement only,
    the last paragraph of Exclusion B.2.d.13 is
    deleted and replaced with the following: But
    if loss or damage by an "accident" results, we
    will pay for that resulting loss or damage.
    Endorsement § B.(2)(c) (emphasis added).14         Had Triple-S intended
    to delete the Mechanical Breakdown Exclusion, surely it would have
    used the word "delete" to say so.       Instead, it made the Mechanical
    Breakdown    Exclusion   inapplicable    solely    to   the   Endorsement's
    coverage.    That Triple-S chose not to use simple language deleting
    the Mechanical Breakdown Exclusion, when it obviously knew how to
    do   so,    further   demonstrates   that    the    Equipment    Breakdown
    Endorsement did not delete the Exclusion from the Policy.
    13
    The referenced paragraph appears immediately after seven
    specific exclusions (including the Mechanical Breakdown Exclusion)
    in the original Policy and states, "[b]ut if loss or damage by the
    'specified causes of loss' or building glass breakage results, we
    will pay for that resulting loss or damage." Causes of Loss -
    Special Form, § B.(2)(d). "Specified Causes of Loss," in turn, is
    itself defined in the Endorsement as "[f]ire; lightning; explosion;
    windstorm or hail; smoke; aircraft or vehicles; riot or civil
    commotion; vandalism; leakage from fire extinguishing equipment;
    sinkhole collapse; volcanic action; falling objects; weight of
    snow, ice or sleet; water damage." 
    Id. at §
    F.
    14
    Although each party set forth this particular policy
    language in its brief, neither makes any argument based upon it.
    -20-
    In essence, AJC's position that the Endorsement deleted
    the Exclusion effectively asks us to redraft the Policy's clear and
    unambiguous language.      Accepting this invitation would contravene
    the   well-established     tenets   of     Puerto     Rico's    insurance   law
    requiring us to interpret and apply unambiguous provisions of an
    insurance contract as they are written.               We, therefore, reject
    AJC's argument that the Equipment Breakdown Endorsement deletes the
    Mechanical Breakdown Exclusion.
    Let's take stock of what this means for coverage.                The
    Mechanical Breakdown Exclusion continues to exist in the Policy.
    And the only coverage to which the Exclusion does not apply is that
    additional      coverage   set   forth     in   the    Equipment     Breakdown
    Endorsement.      So, coverage for AJC's loss must flow from that
    Endorsement because any potential alternative source of coverage
    falls prey to the Mechanical Breakdown Exclusion.               Thus, the only
    coverage available for AJC's loss is provided by the Spoilage
    Coverage, as set forth in the Equipment Breakdown Endorsement.
    3.    $25,000 Spoilage Coverage Limit
    This brings us to AJC's final argument.
    As we mentioned, the Endorsement's Spoilage Coverage
    comes with its own $25,000 Spoilage Sublimit.                  See Endorsement
    § A.(2)(c) ("The most we will pay for loss or damage under this
    coverage is $25,000 unless otherwise shown in a Schedule.").
    Although it is not particularly clear from its brief (or oral
    -21-
    argument), AJC seems to be arguing that even if coverage for its
    loss is found in the Endorsement's Spoilage Coverage rather than
    the main Policy, the $500,000 coverage limit in the Declarations
    nevertheless prevails over the lower Spoilage Sublimit.     This is
    because, in AJC's view, the Sublimit applies only to spoilage of
    goods owned by the Named Insured, Economy, and not goods owned by
    Economy's clients.    AJC asserts that, since the $25,000 Spoilage
    Sublimit does not apply to its loss, the $500,000 limit set forth
    in the Declarations becomes available to it.15   Triple-S, however,
    tells us that the Spoilage Sublimit applies to Economy's loss of
    perishable goods no matter who owns those goods.
    To unravel this question, we return to the Endorsement's
    language.    The relevant part of the Spoilage Coverage provision
    states the following:    "We will pay for your loss of 'perishable
    goods' due to spoilage."    Recall that "you" and "your" refer only
    to the Named Insured, Economy.    Thus, what this provision says is
    that Triple-S will pay up to $25,000 for "Economy's loss of
    'perishable goods' due to spoilage."     Since AJC's goods spoiled
    while in Economy's freezers, this $25,000 Sublimit kicks in to
    limit AJC's recovery.
    15
    AJC does not, however, explain why this might be so where
    the only coverage for spoilage is by way of the Mechanical
    Breakdown Endorsement, not from the main Policy itself. This turns
    out to be academic anyway, given our ultimate conclusion.
    -22-
    Attempting to get out from under the Spoilage Sublimit,
    AJC urges us to add a "your" to the sentence and read it to say
    that Triple-S will only pay for "Economy's loss of Economy's
    'perishable goods' due to spoilage."          This interpretation simply
    cannot be squared with the Endorsement's plain and unambiguous
    language.
    According to its terms, the $25,000 Sublimit comes into
    play where Economy is responsible for the spoilage of perishable
    goods, regardless of who owns them.           This comes as no surprise.
    Economy's    business,   after   all,    is   storing    other   companies'
    perishable goods.    So it makes sense that Economy would seek to
    obtain insurance coverage for those goods.16            This commercially-
    sensible    rationale,   along   with   the   explicit    Policy   language
    employed by the contracting parties (Economy and Triple-S), work
    hand-in-hand to convince us that it would be unreasonable for us to
    read an extra "your" into the Spoilage Coverage. In the absence of
    any ambiguity in the Policy language, Puerto Rico law calls for us
    to apply the Endorsement and its $25,000 Spoilage Sublimit as
    16
    We note that when the Puerto Rico Supreme Court considers
    an insurance policy in its entirety, as we do here, it does not
    hesitate to "take into account certain extrinsic elements that may
    shed light on the intention of the parties." Soc. de Gananciales
    v. Serrano, 
    145 P.R. Dec. 394
    , 400 (1998). "These elements may
    vary according to the circumstances of each particular case, but
    they generally are:     the parties' contracting intention, the
    premium agreed on, the circumstances surrounding the negotiation
    and the contract, and the practices and customs established by the
    insurance industry." 
    Id. at 401.
    We, too, feel free to consider
    these factors as necessary.
    -23-
    written. We may not judicially redraft the Policy to reflect AJC's
    wishes.
    Here, it is uncontested that AJC suffered a loss to its
    perishable goods as a result of Economy's malfunctioning freezers.
    We have already determined that coverage for this loss is provided
    by the Spoilage Coverage set forth in the Equipment Breakdown
    Endorsement.     Thus, pursuant to the clear terms of the Spoilage
    Sublimit, the most that Triple-S is required to pay out due to this
    loss is $25,000.     Any other conclusion would be contrary to the
    Endorsement's plain language and run afoul of basic precepts of
    Puerto Rico insurance law.     We, therefore, apply the Endorsement
    and Spoilage Sublimit as written, and we conclude that the most AJC
    may recover for Economy's loss of AJC's perishable goods is
    $25,000.17
    17
    One last note:   AJC's brief includes an allegation that
    Triple-S "has admitted that the coverage under Personal Property of
    Others and its Limit of $500,000.00 is available for damage caused
    by an equipment breakdown." Appellant Br. at 22. Although AJC
    cites the addendum to its brief to support this statement, see 
    id., AJC waited
    until its reply brief to explain that this admission
    comes from the parties' proposed pretrial stipulations of fact, see
    Appellant Reply at 8 n.2. Assuming an argument along these lines
    hasn't been waived, United States v. Arroyo-Blas, 
    783 F.3d 361
    , 366
    n.5 (1st Cir. 2015) (recognizing that we need not address arguments
    that a party saves for its reply brief), and that it is appropriate
    for us to consider materials submitted in an addendum to a party's
    brief but not the joint appendix, see Appellee Br. at 4 n.1
    (pointing this out), it is unavailing.
    The proposed stipulation states, "Triple-S admits that the
    coverage under Personal Property of Others and its Limit of
    $500,000.00 is available for damage caused by an equipment
    breakdown."    Recall that the Equipment Breakdown Endorsement
    provides more than just Spoilage Coverage. See, e.g., Endorsement,
    -24-
    III.   CONCLUSION
    For the foregoing reasons, the district court's judgment
    is affirmed.
    § A.(1)(a) (providing coverage for a mechanical breakdown of
    covered equipment). Because we hold that coverage for AJC's loss
    is found solely by way of the Endorsement's Spoilage Coverage, the
    door remains open to the possibility that claims falling under
    different coverage provisions in the Endorsement could be covered
    up to $500,000. There is simply nothing inconsistent between the
    Triple-S admission and our holding today.
    -25-